The growing superannuation industry has led to more and more individuals trying to understand their own super. To fully understand what superannuation is, an individual has quite a few aspects they need to research and understand. Contributions, investments using your super, fees, insurance, taxes are the crux of what makes superannuation. Before trying to comprehend these areas, an individual should first try and understand what types of funds are there. No matter who you are, you will require a super fund to hold the money you intend for your retirement, and the type of super fund you choose can greatly affect the amount you have in there once you retire.

Retail super funds, industry super funds and self-managed super funds are the three main types of super funds an individual can choose from. Once you start work, quite often your employer will pay your super in the default fund of their choice unless you specify otherwise. These default funds are either retail or industry super funds. Although there isn’t a large amount of differences between the two it is important to understand what different characteristics may be present between the two.

Retail super funds were predominantly designed for those individuals interested in saving and investing for their retirements. Initially, they were created for wealthier individuals. These funds began for the dual process of helping investors save for their retirements as well as generate profit for the funds themselves.

Industry super funds historically were created for individuals who were members of trade unions. Essentially it was aimed at blue collar individuals. Industry super funds are not-for-profit organizations, and for this reason they charge lower fees than retail super funds.

Quite often, individuals will find themselves as a member of one or more retail and industry super funds through different employment and changing jobs. Those who are not as involved in their superannuation will unlikely have little care regarding whether they are a member of an industry or a retail fund. The differences between the two aren’t that difficult to comprehend. Some individuals who may be better off in a retail fund often find themselves in an industry fund and vice versa. The end goal of all super funds is to provide savings for retirement.

When comparing types of super funds, the real distinction lies between self-managed super funds (SMSFs) and all other types. A self-managed super fund is essentially a trust that is different to retail or industry superannuation funds as it is run by the members of the SMSF. This type of super fund gives these individuals complete control of how the investments within the fund are decided.

Deciding whether you should be in a retail or industry super fund can be done by simply comparing the different types of funds and the different benefits they have online. However, deciding whether you should have an SMSF as opposed to a retail or industry super fund is a bit more complicated and advice should be sought from a financial advisor and SMSF accountant.

The overarching goal of a self-managed super fund is the same as a retail or industry super fund; to provide for your retirement. However, it is the other aspects of the super fund which make these differ from other types. These aspects need to be fully understood and properly considered before deciding which option is best for you.

Fees: one of the most prominent differences amongst self-managed super funds and other types of funds are the fees involved. SMSFs have much lower fees. These super funds eliminate any unnecessary third parties and members can enjoy much lower fees. Most retail and industry super funds have annual fees, along with fees to change investment strategies and sometimes entry and exit fees. Although there are fees involved with self-managed super funds, they are much less than retail or industry super funds. Please note that this is all dependant on the balance of your super. Generally speaking it is not recommended to set up a SMSF with a low super balance.

Investment control: ranked as the most significant reason for the change to self-managed super funds, greater investment control is perhaps the greatest difference between a self-managed super fund and other funds. A self-managed super funds allows its members to control how the investments are run. Although there are some restrictions on this, there is much more freedom and greater control for an individual within a self-managed super fund as opposed to a retail or industry super fund.

Asset transfer: like retail and industry super funds, members of an SMSF can make personal contributions to their super funds. Members in an SMSFs have the added advantage of being able to transfer personal assets to an SMSF (known as ‘in specie’ contributions). Assets such as listed shares and commercial property are able to be transferred to an SMSF, a benefit which retail and industry super funds do not have.

Insurance coverage: most industry and retail super funds have insurance already provided for their members. This insurance is often life insurance and total and permanent disability (TPD) insurance. This cover is cancelled once an individual roll’s their funds to a self-managed super fund. For this reason, a self-managed super fund member will most likely have to organize this insurance cover themselves which can be tedious and costly. However, individuals with multiple super funds and an independent life insurance policy can sometimes find themselves paying for two policies which can be avoided.

Knowledge: a self-managed super fund requires you to be in charge. This includes all investment decisions. In a retail or an industry super fund there are financial advisers on deck to assist with any investment query’s you may have. With a self-managed super fund you may not have immediate access to expert SMSF investment advice which can potentially hinder your investment potential or even cost you a large amount through failed investments. To obtain financial advice for a self-managed super fund it is required for you to see a financial adviser who can provide the appropriate advice. Without a financial adviser, you are required to have pre-existing knowledge and skill of potential investments and financial activity. Apart from a financial accountant you will also require the services of a savvy SMSF accountant to look after the day to day compliance needs of the SMSF.

Risk: a retail or industry super fund has enough funds through its plethora of members to diversify most forms of risk. The ability to diversify your own risk for your self-managed super fund is something that requires skill, time and knowledge. It is imperative that any and all investments are diversified adequately for your self-managed super fund.

Setting up and starting an SMSF is not very difficult to do. With the right tax accountant and guidance this can be done quite easily. Managing your SMSF can be tricky. There are many aspects to consider before you make the change to an SMSF and understanding all of these aspects is essential to see growth and success of your super. Our SMSF accountants in North Ryde can analyse your situation to assess whether a SMSF is a suitable structure.

Self-managed super funds provide the flexibility and scope to maximise your super. However, with poor management they can lead to great losses. Despite the pros an SMSF may have, it is very important to examine all features of it before starting your own.

Hopes of Auto Industry Shattered! 

An article by:-

CA Pradeep Jain

CA Neetu Sukhwani &

Somya Jain

Introduction:- With the forthcoming budget 2016-17 there were lot of hopes and expectations of the automobile industry that they will be encouraged by way of various tax incentives but the budget came as a curse to them. All the hopes went in vain as soon as the Finance minister announced levy of Infrastructure cess on the vehicles. The levy of infrastructure cess came as a big blow to the car manufacturers.

Levy of Infrastructure Cess:-Vide Budget 2016-17, the government has announced to levy infrastructure Cess at the rate of 1 to 4 per cent on manufacturing of cars.

Infrastructure Cess is being levied on motor vehicles, of heading 8703, as per details mentioned hereunder:

Rate of Infrastructure Cess – Eleventh Schedule of Finance Bill 2016 read with Notification No. 01/2016-Infrastructure Cess dated 01.03.2016

The government has provided full exemption from the levy of Infrastructure Cess without any conditions on the following motor vehicles:-

SERIAL NO.

CHAPTER HEADING

DESCRIPTION OF EXCISABLE GOODS

1.

8703

Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles

4.

8703

Electrically operated vehicles, including three wheeled electric motor vehicles

5.

8703

Hybrid Motor Vehicles

6.

8703

Three wheeled vehicles

8.

8703

Hydrogen vehicles based on fuel cell technology

Furthermore, the government has provided exemption to the following motor vehicles subject to satisfaction of conditions prescribed therein:-

SERIAL NO.

CHAPTER HEADING

DESCRIPTION OF EXCISABLE GOODS

CONDITION NO.

2.

8703

Motor vehicles (other than three wheeled motor vehicles for transport of upto seven persons), which after clearance has been registered for use solely as ambulance

1

3.

8703

Motor vehicles (other than three wheeled motor vehicles), which after clearance has been registered for use solely as taxi

1

7.

8703

Cars for physically handicapped persons

2

It is also worth noting that the condition no. 1 provides the exemption by way of refund mechanism as motor vehicles after clearance has been registered as ambulance or taxi.  A certificate issued by concerned State Transport Authority that the motor vehicle has been registered for use as ambulance/taxi is also required to be submitted to Assistant/Deputy Commissioner of Central Excise within 3 months or extended period of 3 months from the date of clearance of motor vehicle.

Furthermore, condition no. 2 requires certification from Deputy Secretary of Department of Heavy Industries that goods are capable of being used by physically handicapped persons and affidavit by buyer of car that the car will not be sold for five years after its purchase.

Moreover, the rate of infrastructure cess for following motor vehicles has been prescribed as follows:-

SERIAL NO.

HEADING

DESCRIPTION OF EXCISABLE GOODS

RATE

9.

8703

Motor vehicles of length not exceeding 4000 mm, namely petrol, liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven vehicles of engine capacity not exceeding 1200 cc

1%

10.

8703

Motor vehicles of length not exceeding 4000 mm, namely diesel driven vehicles of engine capacity not 2.5% – exceeding 1500 cc

2.5%

It is worth noting that the effective rates of the Infrastructure Cess have been made applicable with effect from 1st March, 2016.

Amendment in Rule 3 of Cenvat Credit Rules, 2004 renders Infrastructure Cess as ‘Non-Cenvatable’

No Cenvat credit of this Infrastructure Cess will be available under the Cenvat Credit Rules, 2004. The Notification No. 13/2016-CE (N.T.) dated 01.03.2016, has amended Cenvat Credit Rules, 2004 made applicable from 01.04.2016 wherein proviso has been inserted in Rule 3 (4) thereby stating that the cenvat credit shall not be utilised for payment of Infrastructure Cess leviable under sub-clause (1) of clause 159 of the Finance Bill, 2016. Hence, when the payment of Infrastructure Cess is to be made in cash only and no cenvat credit can be utilised for its payment, it is implied that the Infrastructure Cess is non-cenvatable. This is for the reason that restricting utilisation tantamounts to restricting availment of credit as there is no point in taking credit when the same cannot be utilised at all.

Good bye words:- The intention of levying Infrastructure Cess is clear from the Budget speech wherein it was clarified that the pollution and traffic situation in Indian Cities is a matter of concern and so this new levy is being introduced on motor vehicles.  However, this infrastructure cess will definitely result in hike in the prices of cars. Moreover, even the Supreme Court has already imposed a ban on registration of diesel vehicles with engine capacity of over 2000 cc in Delhi, observing the alarming rise in pollution levels. Now the government has decided to impose infrastructure cess upto 4 per cent.